BY Fast Company 5 MINUTE READ

Last year, Netflix offered Hollywood something unexpected: A rare peek inside the highly secretive streaming service. The company rented out a huge LA soundstage and invited each of the major talent agencies to come one by one and watch presentations from the heads of Netflix’s many divisions – from unscripted series to stand-up comedy – as they outlined the company’s ambitions. For Netflix to lavish this kind of attention on agencies – one attendee described the food offerings as “craft services gone wild” – it wanted something. The primary, not-so-secret message to the gatekeepers of the world’s biggest stars? Please make Netflix your destination, not your last resort, for making movies. “How do we convince A-list actors and directors to work at our studio?” is how one agent who was there describes the subtext of Netflix’s message. “How do we get Tarantino one day?”

Since launching its first original show, House of Cards, in 2013, Netflix has more than proven itself in the television game. Buzzy series like Orange Is the New Black and Stranger Things have helped the company grow to
137 million subscribers, and last year, it tied with HBO for the most Emmy trophies.

For all its TV success, though, Netflix still needs films. “Movies are what drive people to a streaming platform,” another agent tells me. “TV series are what keep them engaged.” Netflix has had licensing rights to existing film catalogues from Disney and other studios since it started streaming in 2007, but the competitive landscape will change radically in 2019. Disney and WarnerMedia have announced plans to launch their own streaming video apps before the end of the year, and they will likely be reserving most of their content for themselves. Meanwhile, Amazon is ramping up its moviemaking ambitions and Apple is also expected to enter the fray this year. For Net­flix to maintain its streaming lead – and prove that one of the stodgiest, most entrenched industries in the world can be sustainably disrupted – it needs to build its own library and create fresh buzz.

This explains why so many new Netflix films have been appearing in the “Recently Added” row of your Netflix app. In 2018, the company released more than 80 original movies, surpassing all the major studios combined. Its 2019 slate includes big-budget features from Martin Scorsese (The Irishman), Michael Bay (6 Underground), and Steven Soderbergh (The Laundromat). Netflix even recently acquired a top Oscar consultancy – the one that ran the Best Picture campaigns for both La La Land and Moonlight.

Netflix’s foray into movies is proving complicated, even messy, as it comes up against Hollywood traditions and practices that, for once, it can’t gleefully knock down with a battering ram made of cash. There have been reports of face-offs between Netflix’s Hollywood-based executives – who value relationships with talent when making creative decisions – and the techies in Silicon Valley who favour its algorithms. Then there’s the debate over Hollywood’s hallowed “theatrical window,” the weeks between a film’s release in theatres and its availability for home viewing. Respecting that time frame has become an irritating thorn for a company that has prided itself on doing things its own way.

Nowhere was this more evident than in Netflix’s last-minute decision to release Roma, a critically lauded black-and-white film from Oscar-winning director Alfonso Cuarón, in theatres three weeks before launching the movie on the app in December. Typically, the streamer has released a select number of films in theatres in order to qualify for awards, but they have simultaneously premiered on the service — a practice that both Ted Sarandos, Netflix’s Chief Content Officer, and CEO Reed Hastings have passionately defended, much to the ire of cineasts who believe in the communal, big-screen experience. Roma was to follow the same plan — Hastings said as much in his letter to shareholders in October. But Cuarón balked and Netflix relented.

In theory, Netflix’s willingness to bend should attract more filmmakers – and benefit the company. Netflix bid on Crazy Rich Asians, for example, but the filmmakers decided to go with Warner Bros. so that the movie would be seen en masse in theatres, a move that helped turn the film into a cultural phenomenon. Crazy Rich Asians became one of the most profitable movies of 2018, grossing $236 million globally on a reported production budget of $30 million. Its profits are likely already $150 million or 37% of Netflix’s Q3 2018 earnings.

The truth is, Netflix is still perceived in Hollywood as the place to sell projects the traditional studios won’t make. Netflix bought The Irishman after Paramount withdrew from the project because of its projected
$125 million budget (which it has reportedly overrun). The Ryan Reynolds–led 6 Underground – which is being cofinanced and distributed by Netflix – also couldn’t get a studio green light because of its cost, according to a knowledgeable source.

The lingering question is whether putting Roma in theatres represents an aberration to appease a prestigious filmmaker or a real pivot (Netflix declined to comment for this story). Netflix has made concessions to Hollywood in the past. Even though it once lauded its recommendation algorithms as all it needed to find an audience for its programmes, it increased its marketing spending to a projected $2 billion in 2018, a 56% boost from the year before.

In the days following the Roma announcement, directors and agents barraged Netflix demanding to know who else would be getting the Cuarón treatment. But Netflix didn’t have an answer or even a clear policy on how it would determine such things in the future (In December, Robert De Niro revealed that The Irishman would be shown in theatres). “They’re a streaming company,” says one agent. “I don’t think Reed Hastings has any interest” in shifting Netflix’s model.

If Netflix embraces theatrical runs, it could become beholden to the kind of considerations that the studios use to determine whether to make a film: Will a certain star play well in China? Will sales to international markets justify a film’s budget? It would also have to deal with box-office performance affecting its talent negotiations (In the case of Roma, Netflix avoided such scrutiny by renting out the theatres that the movie played in, keeping it from having to report box-office grosses. It could do this on a steady basis if it winds up buying an art-house cinema chain, as has been rumoured). “Everyone has an algorithm,” says Anthony Bregman, a producer of the Nicole Holofcener film The Land of Steady Habits and Tamara Jenkins’s Private Life, both of which wound up at Netflix after studios insisted on creative and financial concessions that the filmmakers weren’t willing to make.

Netflix’s freedom from those strictures has allowed it to lean into mid-budget dramas and romantic comedies that are ignored by the studios, which focus almost exclusively on globally appealing franchise films with built-in fan bases. Whatever you may think of the critical merits of the teen rom-com The Kissing Booth, which Netflix says is one of its most successful original films, it probably never would have been made anywhere else. Then there are the smaller, more daring projects, like Paul Greengrass’ 22 July, based on the 2011 terrorist attacks in Norway. “I don’t know who would have made that,” says one manager. “Thank God [Netflix is] doing that stuff.”

There could also be a simpler reason for Netflix’s sudden filmmaker friendliness: Movies offer more brand prestige than television — not to mention personal validation for Netflix brass. Says one insider: “Ted [Sarandos] wants to win an Oscar. The Emmy thing, he’s figured out. He wants an Oscar.”

Article originally appeared in Fast Company SA’s May 2019 issue.